Joann, a well-known name in the crafting and arts supplies world, has filed for bankruptcy for the second time in 2024. The retailer, which dropped “Fabrics” from its name a few years ago, announced that it is now looking for a potential buyer as it tries to overcome significant financial struggles.
Inventory and sales issues lead to bankruptcy
The 82-year-old company, famous for its wide selection of crafting materials, cited inventory problems and sluggish sales as key reasons behind its decision to file for Chapter 11 bankruptcy once again. Joann’s first bankruptcy filing occurred in March 2024, but the company managed to emerge a month later as a private entity, keeping all of its stores open. However, the retailer was unable to recover from ongoing challenges and is now seeking to sell off its assets.
Joann’s bankruptcy filing revealed some shocking problems with its supply chain. The company experienced an “unexpected ramp-down” in production, leading to a shortage of popular items that its customers depend on. As a result, sales were heavily affected, and the company’s $615 million debt became unmanageable.
The company is now following the trend of other brick-and-mortar stores struggling to stay afloat in today’s changing retail landscape. Inflation has led many Americans to reduce their discretionary spending, and the shopping boom that occurred during the pandemic has faded. Stores that were already on a downward trajectory before 2020 are now facing even tougher conditions as consumer habits return to normal.
According to Joann’s interim CEO, Michael Prendergast, the company’s challenges over the past few years have been “significant and lasting.” He explained, “Coupled with our current financial position and constrained inventory levels, [these issues] forced us to take this step.”
Looking for a buyer to save the business
As Joann navigates its second bankruptcy, it has announced that it is seeking a buyer for most of its assets. The company has named Gordon Brothers Retail Partners, the investment firm that recently purchased much of Big Lots, as the “stalking horse” bidder. While the price remains undisclosed, the company is open to receiving better offers from other potential buyers during the bankruptcy auction.
Experts have weighed in on Joann’s future, with some predicting that the retailer may be on the brink of liquidation. John Bringardner, the head of research firm Debtwire, believes Joann made a mistake by not closing underperforming locations during its first bankruptcy filing. He stated that unless Joann can find a higher bidder, Gordon Brothers will likely take control and begin closing down the business.
Despite these challenges, Prendergast assured customers and employees that the company is still committed to its mission of serving creative enthusiasts. “We remain committed to continuing to support them and serving our customers – the sewists, quilters, crocheters, crafters, and other creative enthusiasts we have served for more than 80 years,” he said.
Joann’s stores and online services remain open during this difficult process, and employees will continue to receive their paychecks. However, the company’s future remains uncertain, with the looming possibility of widespread store closures and layoffs if a sale is not completed successfully.
The decline in Joann’s revenue has been evident in recent years, except for a brief period during the pandemic when people stuck at home turned to arts and crafts as a hobby. However, that temporary boost has since faded, and loyal shoppers have started shifting their business to competitors like Hobby Lobby and Michaels, which have been gaining ground in the market.
As Joann struggles to find a way out of its financial troubles, it faces an uncertain future in the ever-evolving retail industry.
